ASEAN’s AEC: A sustainable integration lesson for Thailand?

Most eyes are on how Fascist Suthep’s movement is hurting Thailand, but some medium to long-term planners are more worried about Thailand’s future, with ASEAN AEC, coming into being next year.

Thailand, before the current political crisis, had a reputation of making most traction, in getting the country to benefit from ASEAN, noting however, ASEAN AEC, is both an opportunity, if Thailand is ready for integration, and also a risk, if Thailand is not ready for integration.

With Fascist Suthep activities, however, most planners, now says, “Thailand must now get its political house in order, then focus on ASEAN AEC.” However, the damaged has been done, and getting Thailand in political order, have in one instant, infrastructure spending to position Thailand as ASEAN AEC hub, has been killed, as a victim, of Thailand messy political scene.

Over the 2013 New Year holidays, the Fascist Suthep lead protesters said they will shut down Bangkok’s traffic for a few weeks. Bangkok’s is Thailand business and tourism center with an annual GDP of about US$100 billion in 2010. That shutting down of Bangkok, would greatly hurt Thailand’s economy, already reeling from months of often violent protest. The latest is, the UK’s Economist magazine, says the estimate of damage, to the economy, since Fascist Suthep went active, is about US$15 billion.

With that type of news, of Fascist Suthep activities, hitting Thailand, on and off, on someday, the following occurred: “Today the market opened and Thailand’s baht fell for an 11th day, the longest losing streak on record, and stocks slid on concern capital outflows will quicken amid prolonged political unrest in the country. The currency touched the weakest level since March 2010, adding to the worst annual loss in 13 years. The benchmark stock index dropped to a 15-month low before a meeting today between the Election Commission and members of the ruling and opposition parties to find ways to ease tensions that have gripped the nation since October. The benchmark SET Index (SET) slid 2.2 percent to 1,270.08, poised for its lowest close since Sept. 13, 2012.”

“The political crisis has badly hurt the Thai economy with delays in state spending, decline in consumption and investments,” Itphong Saengtubtim, the head of research at KGI Securities (Thailand) Pcl, told a wire service. “The tourism sector, which was the economy’s only bright spot, is also beginning to feel the adverse impact with plans for more demonstrations in Bangkok.”

A host of sustainable issues are related to the rich and poor gap, from economics, to democracy, to social, and to even the environment. And Thailand. with one of the globe’s widest rich and poor gap, have suffered on all fronts and all accounts, from the lack of being able to sustain most things, related to and critical to Thailand’s development.

The root of Thailand rich and poor gap, resulting in an inability to sustain much in Thailand, is of course, the long struggled between the Bangkok establishment traditional control of all things Thailand, and the rising up, of the rest of Thailand, minus the south, challenging the dominance of Bangkok’s traditional elites.Democracy to the grassroots is their means towards a better life, which runs against the Bangkok’s establishment anti-democracy for “Exploitation” control philosophy. In the current bout of that struggle between the two sides, the talk has reached the level, that one side, mostly the grassroots, is talking about of civil war and the other side,mostly the Bangkok middle-class and the super-rich oligarchs, is talking about mass slaughtering of the poor. The unfortunate fact is, what Thailand is currently going through, is just a version, of what had been going on since absolute menarche was replaced with constitutional monarche, in 1932. Thailand, for some reason, have learned little from its history.

It is unfortunate, that the Bangkok establishment, for all their talk about “Sustainable Economic Development” with always criticizing the Shinawatra Family of its “Populous Policy” as not sustainable, have not come to realized, that “Sustainable Economic Development” depends on “Sustainable Democratic Development.” One of these days, the Bangkok establishment is going to have to wake up, and understand/accept, that their deliberate dis-mantling of Thailand democratic process, will “Destroy” any chances, of “Sustainable Economic Development.”

With Thailand rock with internal sustainability question, Thailand’s ability to integrate with ASEAN, is questionable.

Jakarta Post, quoting a local Thai press, reports

But first and foremost, we must put our political house in order. The consequences of failing to do so will be grave: Investors will be scared away, while local businesspeople will suffer from lack of guidance and support. It will be impossible for Thailand to take advantage of the free flow of trade, investment, production and human resources if it remains at its relatively low level of competitiveness.
Thailand has a mountain to climb. The AEC is a summit worth aiming for, but only the strongest “mountaineers” will reach the top and enjoy the great view. The question is, can Thailand shirk its “sick-man” status quickly enough this year to ascend to the summit and enjoy the benefits along with other Asean nations?

Thailand’s lost ASEAN AEC Plan

About US$70 billion is being planned by the Yingluck administration, on infrastructure, mostly, hard transportation investments such as road and rail, and also river transport, to position Thailand as an ASEAN hub.

Prime Minister Yingluck Shinawatra has visited the Thailand’s Future 2020 exhibition in Khon Kaen, where she shared her vision on the country’s future development through mega projects. The exhibition is being held at Anek Prasong Hall of Khon Kaen university, during October 25th-27th. During her speech, the Premier stressed on the importance of the mega projects, including how it could better the locals’ quality of life, and what Khon Kaen and its nearby vicinity stood to benefit. She elaborated that the economy would improve through better infrastructures, communications, and logistics system. The PM added the government had come up with a strategic policy aimed at improving the potentials of Thai entrepreneurs, enabling them to compete in the international market. At the same time, Ms Yingluck added, with infrastructures completed, Thailand would certainly draw in more foreign investors, which would help drive the economy in the long run.

Most analyst says ASEAN‘s AEC concept, with a target of 2015 is just a mile-stone, and that AEC will take more time. With that, the ASEAN’s AEC concept had been tarnished to some extent, but many are still committed to the concept. Khao Sod reports, “Prime Minister Yingluck Shinawatra today gave a keynote speech at the opening of the “Path for Thailand toward ASEAN Community” exhibition in Bangkok, saying in parts that the government must re-adjust policy to welcome the change, and should not treat the integration as a threat. According to the Prime Minister, Thailand must develop new strategies, particularly by public sectors, to create more competitiveness in the region and improve the standard of living in Thailand. By creating competitiveness in the region, Ms. Yingluck suggested that Thai’s public sector should readjust regulations to support Human Rights and ease trade protectionism. ”The country also needs to rebalance their government public services to be more efficient and effective, in order to develop the standard of living in Thailand” Ms. Yingluck is quoted as saying. The Prime Minister also said that the wobbling global economy may become a challenge to the country. The US Quantitative Easing policy had strengthened national currency, due to large capital inflow into the country.

However, the situation has worsened the national export sector, which accounted up to 60% of national GDP. She stressed that Thailand should be ready for the economic fluctuation, both in domestic, regional and international stages. ”The private sector will also need to adjust their policy and improve their competitiveness through providing a better quality of goods,” Ms. Yingluck said. She also suggested that the country should rely more on green energy. Apart from the economic fluctuation, Ms. Yingluck noted, the nation is also facing a lack of capable workforce, as the elderly population is expected to increase from 14% in 2013, to 27% in 2025. At the end of her speech, the Prime Minister added that in order to be competitive in meeting the new challenge, and to live together peacefully, we must integrate our social and cultural aspects. Thai people must also develop English skill, as the language becoming more important as the media to communicate within the region, she added.

University of the Thai Chamber of Commerce (UTCC) reports:

Political instability is a key risk for Thailand’s economic growth next year, prompting the University of the Thai Chamber of Commerce (UTCC) to potentially cut its growth forecast next year to only 3% if protests are prolonged. The university’s study yesterday pointed out that politics will become more stable if the caretaker government is widely supported by all stakeholders to carry out political reform ahead of an election. This will rebuild consumer confidence, promote spending and drive economic growth to 4% next year. This will be the case even if there is no election on Feb 2 as scheduled, a scenario expected to create a political vacuum, the study found. UTCC expects the economy to see ”leap-frogging growth” if political reform is achieved before the election. However, if reforms are not worked out, it believes political tensions could cost Thailand 200-300 billion baht in the worst-case scenario if protests are prolonged and turn violent.

The Economist reports:

RARELY does a supposedly democratic country find itself in such a mess. Consider the following: at the time of writing Thailand has only a “caretaker” government, the real thing having resigned last week to allow for an election; the official opposition party has resigned from parliament en masse, and is yet to decide whether to take any further part in the democratic process; the leader of the opposition, Abhisit Vejjajiva, has just been indicted on a murder charge for ordering a crackdown on street protesters in 2010; his former colleague and deputy prime minister, Suthep Thaugsuban, had been charged with various other offences such as rebellion, arising from the fact that he is currently leading a revolution in the streets to try to topple the aforesaid (elected) government that has already resigned; and a former prime minister, Thaksin Shinawatra, living in self-imposed exile, faces a two-year jail term on charges of abuse of power and corruption, should he return to Thailand. Oh, and Mr Suthep faces murder charges too, the same as Mr Abhisit’s, from 2010.

Bad as it is, this litany of dysfunction is no longer very new. It all arises from the sometimes deadly conflict waged between Mr Thaksin and his opponents, since a time before he was deposed by military coup in 2006. It is depressing to see Thailand’s politicians become so obsessed by the supposed failings and virtues of just one man; only Italy’s fixation on Silvio Berlusconi really bears comparison. But, miraculously it seemed, at least Thailand’s economy has come through it all pretty well. Many other countries’ would have collapsed under the deadweight of political squabbling and myopia.

But for how long can this fortunate state of affairs continue? So far as investors and businessmen crave certainty and predictability, the only thing certain in Thailand these days is unpredictability. The prime minister, Yingluck Shinawatra, Mr Thaksin’s sister, now seems to have only the shakiest grasp on power. It’s a fair bet the election she has called for February 2014 will never even happen. She has assembled forums to discuss vague concepts of “reform”, to appease Mr Suthep. At the same time Mr Suthep pushes for a completely new government to be run by an unelected “people’s council”. That is also known as a coup.

For Thai businessmen, this is coming at the worst possible time: the beginning of the tourist season. Tourism is vital to the national economy. Last year the country pulled in about 22m visitors. Overall, the tourism-and-travel sector contributed about $28 billion to Thailand’s economy, which would make it worth 7.3% of GDP for 2012, according to the World Travel and Tourism Council (WTTC). Including tourism-and-travel’s indirect impact on the economy would make the sector’s value rise to $64.3 billion, or 16.7% of GDP. The sector employs about 2m people directly, and far more indirectly.

There are already signs that the ongoing street protests and occasional political violence and thuggery are putting plenty of people off coming to the country—hardly surprising, as dozens of foreign governments have issued warnings against travelling to Thailand. The political situation is estimated to have reduced the number of inbound tourists in the month to mid-December by 300,000 people, or 8% of the number expected, says Yutthachai Soonthronrattanavate, president of the Association of Domestic Travel.

That is worrying, as is the thought that the current turmoil could drag on to the election in February, or even longer if that proves inconclusive—in other words, throughout the high season. Mindful of the value of the tourism industry, Mr Suthep’s mobs have promised not to occupy and close down Bangkok’s international airport, as their predecessors, the “yellow shirts”, did in 2008. That is now well understood to have hurt the tourist industry, and the wider economy.

That will not be enough to offset the difference however, as even more tourists are now attuned to Thailand’s problems and willing go elsewhere on their merry ways. Bangkok also makes a bundle as a destination for conferences and conventions, but now organisers are actively considering going to other South-East Asian venues rather than endure the road closures and traffic chaos that accompany endless rounds of street demos (to say nothing of the threat of violence).

The government’s own grandiose spending plans have been thrown up in the air too. A key part of the government’s economic strategy had been to boost domestic demand by Keynesian-style spending, the political failure to have a functioning government has effectively undermined that whole strategy. Plans to borrow as much as $68 billion for new railways and roads are to be put on the back-burner as parliamentary and constitutional approval for these bills is delayed indefinitely. Many businesses, such as construction companies, stood to benefit from those expenditures, and now their plans have been derailed as badly as any holidaymaker’s. Thailand’s growth rate for 2013 is likely to weigh in at 3% or so, relatively modest for the region. The government’s hope to achieve a rate of 7% for 2014 now looks wildly optimistic.
For all these reasons it’s not surprising that business organisations and their representatives have been actively calling for political reconciliation. Some have even been putting themselves forward as possible mediators. Anything to let the politicians know that gravity cannot be defied forever. Sooner or later, Thailand’s awful politics is bound to catch up with its economy.